Cyprus Tax Laws and Regulations
Cyprus Tax Laws
With over 20 years of experience, Bradford Jacobs is a leading international payroll provider. Our expertise in payroll and tax supports our work and helps us manage complex regulations facing companies wishing to expand into Cyprus.
Cyprus is seen as the link between Europe, Africa, and Asia – offering many unique tax opportunities for international businesses, such as low corporate tax, favourable double taxation treaties, no withholding tax on dividends and interest, and more. The company also benefits from a well-educated workforce, a low-cost business environment, and low costs of living.
Dealing with tax matters is a major issue for companies seeking to develop an international presence, particularly as disciplinary measures can apply for non-compliance.
Tax, and especially overseas tax, can be complicated.
Overview of Taxes in Cyprus
Individual Income Tax: Progressive 0-35%
Corporate Income Tax: 12.5%
Employer & Employee Social Security Contributions: 22.9% (employer) – 10.95% (employee)
Capital Gains and Withholding Taxes: N/A
Cyprus Individual Tax – Single, Married
An individual’s liability to pay income tax is determined by their residency status as well as the source of their income. Residents are taxed on their worldwide income, whilst non-residents are only taxed on certain types of income derived from sources in Cyprus.
Individuals are taxed on their employment income, including bonuses and certain employment benefits. However, they are not taxed on reimbursements for business travel and business entertainment expenses.
The current tax return system is based on self-assessment – individuals can file tax returns via the online tax authority platform known as Taxisnet and can amend them as necessary. A claim for deductions and allowances (IR59) is prepared at the beginning of the tax year, and this must be accompanied by a statement of taxable income (IR63), along with the tax return.
To be eligible for this system, you need to register for a taxpayer’s identification code.
Personal Income Tax in Cyprus is progressive, based on the amount of income an individual has earned:
- 0 – tax rate 19,500: 0%
- 19,501 – 28,000: 20%
- 28,000 – 36,300: 25%
- 36,301 – 60,000: 30%
- 60,000+ : 35%
Personal Income Tax is withheld from the individual’s salary every month by their employer. An individual is also required to pay social security contributions – they must be withheld by employers and paid to the Social Insurance and National Health Funds by the end of the following month.
Special Defense Contribution Tax
Individuals are also required to pay contributions to a Special Defense Contribution Fund, or SDC. This applies to most types of dividends, interests, and rental income which are earned by individuals who are both tax residents and Cyprus domiciled. These rates are as below:
- Dividend – 17%
- Interest – 30%
- Rental Income – 2.25%
Tax Returns are due by the 31st of July of the following tax year. The employer is obligated to withhold income tax for their employees’ income. However, if an individual is earning other income which is not subject to withholding tax, payments of taxes are to be paid in 2 equal instalments – 31 July and 31 December within the same tax year.
Taxable income and liabilities should be determined and declared in euros.
In the case of married couples, both individuals are to be taxed separately.
Non-residents in Cyprus are taxed on Cypriot-sourced income and are also obliged to file tax returns on them.